Traditionally, original equipment manufacturers (OEM) were responsible for creating all design and engineering data and manufacturing products using that data; but not anymore. Today, more and more OEMs have passed most of these roles to suppliers, adopting what is known as strategic outsourcing. Under this model, suppliers design and manufacture products based on agreed-upon specifications and deliver them to the OEMs for final assembly.
Strategic outsourcing has become increasingly common, owing to the benefits we discuss below. Many companies that were previously hesitant to outsource are now more comfortable adopting this practice. For instance, for the first time ever in 2003, Boeing outsourced over 70% of the development and production of its 787 Dreamliner aircraft. Boeing appeared to have borrowed a leaf from its fiercest rival, Airbus, which has been outsourcing production since the late 1970s. Usually, Airbus’ suppliers, located in multiple countries, perform research and development (R&D), sub-assembly, and quality control of parts and components. Airbus then handles final assembly, flight/ground testing, airworthiness certification, marketing, and customer services.
Strategic outsourcing has permeated into and is deeply ingrained in the operations of many companies across various industries, from manufacturing to architecture, engineering, and construction (AEC). As this happens, component suppliers are becoming full-service partners for companies, handling everything from rapid prototyping and design to manufacturing and shipping finished devices or products on their behalf. For their part, companies handle sales, marketing, and customer support. However, in cases where this is not feasible, companies can outsource specific aspects, such as the design of components or their manufacture.
Nevertheless, design outsourcing can be risky because it requires companies to share competitive, technical, proprietary, and technological knowledge. This risk requires a strategic approach. Accordingly, this article covers how strategic outsourcing CAD services can enable companies to leverage external CAD design services for growth.
Table of Contents
Understanding Outsourcing of CAD Services
Outsourcing CAD services entails transferring computer-aided design (CAD) and computer-aided engineering (CAE) to a third-party service provider or partner capable of providing the services to the buying company, i.e., the one that outsources. By outsourcing CAD design, buying companies transfer the responsibilities for creating CAD designs and CAD models as well as undertaking analysis, simulations, and visualizations to third parties from an in-house team of designers or employees.
Generally, outsourcing took shape within the manufacturing sector when organizations moved manufacturing operations to overseas companies. Their reasons for outsourcing at that time were wide-ranging. For instance, in 1911, US-based Ford Motor Company started producing the Ford Model T in England to reduce transportation costs.
Later in the 1960s, US-based companies started moving labor-intensive processes offshore to reduce costs. It was not until the 1990s that companies started outsourcing product development to reduce labor costs, tap into local markets, or build local capacity and domain knowledge to speed the time to market. It was during the 1990s and the early 2000s that companies laid the foundation for the now-popular process of outsourcing CAD services.
Approaches to Outsourcing CAD Services
There are three design outsourcing options or approaches:
- Onshore outsourcing
- Nearshore outsourcing
- Offshore outsourcing
Onshore Outsourcing
Onshore outsourcing keeps operations within the borders of a single country. Under this outsourcing approach, a buying company located in Germany, for instance, partners with a third-party provider in Germany. It keeps everything close and ensures minimal cultural misalignment, if any. It also takes advantage of the common judicial dispensation to keep everything in check. Moreover, onshore outsourcing allows you to benefit from seamless communication.
Nearshore Outsourcing
Buying companies that take the nearshore outsourcing approach usually partner with third parties in a neighboring country or region. It mostly involves partnering with service providers within the same continent. For instance, a company in the US can outsource CAD services to a partner in Mexico or Canada. The proximity between the two countries, as well as existing regional agreements, ensure cultural alignment.
Offshore Outsourcing
Also known as offshoring, offshore outsourcing takes advantage of globalization. Buying companies that choose the offshore outsourcing route contract partners located in far-flung countries across seas and oceans. Usually, these partners are situated in an entirely different continent. For instance, a UK-based company can partner with an India-based service provider. While offshore outsourcing carries benefits such as decreased cost, it is plagued by a few challenges, including cultural, language, and time zone differences, just to mention a few.
Why Outsource CAD Design?
The benefits of outsourcing CAD services and CAD design are immense. They include:
1. Lower Costs
One of the attractive benefits that draws buying companies towards outsourcing is cost arbitrage. With labor costs varying from one country to another, companies in nations with relatively high wages outsource CAD services to partners in countries with lower wages. Capitalizing on the differences in labor costs, companies can reduce their administrative costs and its impact on the bottom line.
2. Improve Competitiveness
By outsourcing CAD services to lower costs, companies can reduce the production costs of their products. This has the intended effect of boosting competitiveness, as it directly contributes to low prices of the final product. The effect is more significant if companies also outsource other processes, such as R&D and manufacturing.
3. Access Specialized Expertise
Companies may not always have the financial capacity to hire an in-house team of experts to perform certain non-core roles. In such cases, they can turn to the outsourcing strategy. Outsourcing allows companies to tap into specialized expertise in specific fields and technologies.
4. Reduce Lead Times
By outsourcing, companies can avoid the need to train their employees for specific tasks. Instead, they can outsource such tasks to specialists who will deliver the CAD designs, models, and other deliverables within a short time. Therefore, companies outsourcing CAD services reduce lead times and shorten development cycles.
5. Narrow the Productivity Gap
Outsourcing CAD services reduces lead times and provides access to specialized expertise. In this regard, it helps companies speed up processes that would have otherwise taken ages. What this means is that they can develop, test, and deliver products as fast as their combined efforts can allow. This narrows any productivity gap between their output and that of their competitors.
6. Export Knowledge and Expertise
Buying companies sometimes need to train their third-party partners on internal practices to ensure quality. These training programs equip the employees of service providers with new knowledge and expertise.
7. Access Latest Technology
Companies are outsourcing to access expertise to implement and deploy certain technologies efficiently. To ensure success, companies are choosing suppliers and partners with domain expertise in those technologies. Outsourcing eliminates the need to hire a team of experts with specialized knowledge, which, as detailed earlier, is far costlier.
8. Provide Surplus Capacity Support
Design firms usually face fluctuations in demand for their services. This means there are times when the influx of new projects overwhelms internal teams. This project boom can be followed by a lull period, freeing up internal teams. Instead of hiring employees during the project boom and firing them during the burst, companies can maintain a lean workforce but engage third-party service providers for surplus capacity support.
Types of CAD Design Services Available for Outsourcing
AEC Services
The AIA International Committee Report on the Offshore Outsourcing Roundtable, released in 2006, indicated that US architecture firms outsourced 69% of all construction documents, 22% of renderings and models, 14% of design development, 11% of schematic design, and 10% of drafting. Fast forward to today, firms are still outsourcing these services alongside other services that have emerged due to the evolution in design technology. Today, architectural companies outsource the following services:
- Scan to BIM (Building Information Modeling)
- Preparation of BIM models
- 3D modeling, including architectural, structural, signage, and mechanical, electrical and plumbing (MEP) models
- Rendering and models
- Construction documentation
- Design development
- Schematic design
- CAD design automation
- CAD drafting and drawing to provide tender or bid drawings and site drawings
- Day-to-day project work
- 2D to 3D CAD conversion
- Visualization, including image rendering and walkthrough BIM models
- Virtual reality and animation
It is worth pointing out that firms often choose what to outsource based on their experiences and internal policies. For instance, some do not outsource construction documents and designs. The reasons for such decisions include the associated liabilities and the need to constantly monitor the process to ensure quality, which obviously negates some of the perceived benefits of outsourcing.
Mechanical Design
Companies can outsource all or some of the following mechanical design services:
- Product design and engineering, including R&D, modeling, and product evaluation (product design and engineering covers the entire product lifecycle of a new product from design and development to manufacturing and delivery of the finished product)
- CAD drafting and design
- CAD automation
- 3D CAD modeling
- Product analysis, simulation, and visualization
- Product optimization
- Reverse engineering to develop new products
- Virtual prototyping
- Technical documentation
- CAD conversion and data migration
Electrical and Electronics Design
Outsourcing electrical and electronic design to third-party partners enables companies to benefit from their partners’ specialized experience or niche expertise. They can expand their capacity by taking advantage of their partners’ in-house team of professionals. Companies can outsource some or all the following electrical and electronics design services
- CAD blueprint designs capturing electrical system designations
- 2D layout drawings
- Electrical schematic drawings, including circuit diagrams; wiring diagrams; building service schematics for access control, data network, and lighting; and schematics for operation and maintenance manuals and power supply
- Circuit design and embedded system design
- Reverse-engineered circuit diagrams of products
- 3D modeling of complete electrical systems in buildings
- Analysis and simulations, including power distribution system analysis and electrical load simulations
- 3D rendering
- Firmware and software development
Custom Solutions
Some projects have unique requirements, which need a personalized approach to provide design solutions. This means universal solutions or approaches may not cut it. In such cases, third-party partners have to consider these unique needs and consequently customize their services to fit companies’ internal practices, standards, and quality assurance programs. Moreover, customization helps solve projects’ distinct requirements.
Choosing the Right CAD Outsourcing Partner
The right CAD outsourcing partner is one of the key ingredients to the success of a CAD project. So, buying companies should extensively analyze their potential partners’ core capabilities as they determine the outcome of the outsourcing venture. The right CAD outsourcing partner should have the following characteristics:
1. Leadership
Third-party partners should be capable of delivering the desired results throughout the duration of the agreement. The ability to deliver the results highly depends on the relationship between the leadership teams of the partnering firms, as this influences how fast approvals are granted and resources released. Only a good leadership team can maintain a strong working relationship.
2. Governance
Governance refers to processes and structures that ensure the buying company’s objectives and the partner’s delivery system are not in conflict. These structures facilitate the delivery of CAD services in accordance with the contract. They also provide the basis for dealing with escalating issues.
3. Business Management
The third-party provider should be capable of delivering CAD designs, CAD models, and other outsourced CAD services according to the agreement. Business management competencies ensure that the partner can manage their operations, hire competent staff, and deliver results without going out of business.
4. Domain Expertise and Knowledge
The third-party partner should have proven experience and expertise to apply professional knowledge when working on outsourced projects. Their expertise should extend beyond the technical know-how of creating CAD designs, animations, and models. It should also encompass the ability to understand and manage the buying company’s business needs.
5. Behavior Management
The partner should be able to inspire its personnel to deliver the outsourced CAD services. A buying company should assess the partner’s ability to motivate its employees. This capability determines whether the CAD designs, 3D models, and other deliverables are delivered on time.
6. Sourcing
The partner should demonstrate the ability to access requisite resources. These could include CAD, CAE, and product data management (PDM) software. Moreover, if the project requires technologies like CNC machines for product development and rapid prototyping, the partner should demonstrate this capability. Also, they should be able to get ahold of these resources without the input of the buying company.
7. Technology Exploitation
As detailed earlier, many firms today are looking at outsourcing as a viable strategy to access resources and skills to develop and manage emerging technologies like the digital twin, digital thread, model-based enterprise (MBE), the Internet of Things(IoT), and more. In this regard, third-party partners should be capable of rapidly adopting and deploying new technology as part of or as an extension of their mandate. However, before exploring and adopting new technologies, partners should consider the buying company’s perspective and objectives. The technology exploitation should be guided by the needs of the buying company rather than what the partner thinks the company needs.
8. Process Improvement
There are always emerging ways to improve processes in order to generate better outcomes. For instance, within the context of outsourcing CAD services, communication of product information across teams in different locations is vital. One of the ways partners and buying companies can improve communication is by integrating PDM software into their respective workflows. In this case, using PDM software helps improve processes, guaranteeing better outcomes by eliminating delays.
9. Program Management Expertise
A partner should be able to deliver not only the CAD design project but also other interrelated projects. Simply put, the partner should demonstrate the ability to offer a wide range of CAD services. To best illustrate this competency, let’s consider an architectural design project in which the buying company required CAD designs showing the floor plans of a five-story building. While the initial scope covered the delivery of floor plans, the buying company may decide to extend the project scope to include BIM models and renderings. In this case, the partner should have the in-house expertise to deliver the new, related requirements.
Best Practices in Managing Outsourced CAD Design Projects
Choosing the right outsourcing partner is just the foundational step; it does not guarantee success in and of itself. Besides selecting the right partner based on the criteria discussed above, buying should implement the best practices in managing outsourced projects. The following best practices facilitate the successful execution, completion, and delivery of CAD design projects:
1. Clear Communication
Companies and their employees should communicate clearly and frequently with their partners as well as internally within the organization. Clear communication ensures all parties understand the outsourcing process, its intended outcomes, and how to complete the outsourced CAD projects.
2. Knowledge Management
Buying companies should implement knowledge management strategies. These strategies enable the companies and their partners to effectively gather, capture, organize, analyze, and share knowledge to enable employees at the opposite ends of the outsourcing spectrum to access the knowledge. The knowledge can include training documents, localized/in-house CAD standards, technical resources, and more.
3. Quality Management
The buying companies must impose quality standards on the third-party partners. They must also require the third-party partners to implement quality management systems and follow a defined quality assurance program. Besides ensuring compliance with regulatory standards, these interventions ensure that companies have a basis for measuring the outcomes of outsourced CAD design projects.
4. Understand Core Competencies
It can be easy for companies to blame third-party partners for incomplete projects or assignments, ignoring their own role in the failure. Thus, before outsourcing, companies should evaluate their own competencies to identify what they are good at as well as what they lack. This helps them establish quite early on potential pitfalls that may delay or block the completion of projects.
Companies that endeavor to understand their core competencies will establish whether they can manage dispersed teams, deal with time zone differences, support file transfer and communication via a myriad of channels, integrate third-party data and designs into their workflow, and more.
5. Cross-cultural Project Management
Offshore outsourcing brings about the element of cultural and language differences. What may mean one thing to one party may signify an entirely different thing to another. Therefore, companies must ensure they have internal competencies to manage the project in such a cross-cultural setting.
6. Ensure Alignment with Future Organizational Plans
As is the case with virtually all organizations, plans regularly change. Unfortunately, sometimes, the outsourced projects may not be completed, especially if structures are not in place to support outsourcing during and after the implementation of the changes. To get around this problem, companies can fortify their internal practices to ensure that the process of outsourcing product development tasks and CAD design aligns with the company’s plans. These plans can include production and strategic plans. This ensures that any new development does not destabilize existing plans. This, in turn, enhances the likelihood of success.
7. Strategic Outsourcing
Outsourcing CAD services is not a quick fix for internal challenges. It is quite risky and carries a great degree of complexity; a lot could go wrong. For this reason, companies should be strategic when outsourcing CAD services like 3D modeling, 2D drafting, rendering, analysis, and much more. They should implement a well-thought-out, detailed plan to stand a chance of success.
Challenges and Solutions in Outsourcing CAD Design
Challenges
Outsourcing CAD services is not always smooth. Companies can and do face a few challenges, including:
- Risks to data confidentiality and intellectual property (IP) rights can prevent companies from sharing proprietary data. This compels partners to work with incomplete data, leading to delays. Companies can resolve this issue by clearly capturing the consequences of breaching IP rights or sharing proprietary data.
- Management’s lack of understanding of outsourcing and the prevailing market conditions can cause outsourcing to be less cost-effective. For instance, buying companies may outsource services that can be completed more efficiently in-house.
- Poor data management practices, e.g., poor version control of documentation, which can cause loss of data and delays
- Misaligned objectives within the buying organization lead to a lack of clarity on the role of the partner organization and what they are supposed to deliver.
- Communication problems, cultural misalignments, and time zone differences can prolong the period for receiving clarification and executing changes, leading to delays
- The unavailability of a skilled workforce within the partner organization due to misrepresentation or lack of due diligence: this challenge can lead to delays in project delivery. It can force buying companies to supervise processes and tasks, going against the intended reason for outsourcing CAD services.
- Errors and poor quality in delivered designs, increasing the number of iterations and revisions
- The overall deterioration of projects due to the conglomeration of the various challenges
Solutions to Outsourcing Challenges
Fortunately, you can solve these challenges. For instance, you can backshore the CAD design, i.e., terminate the outsourcing contract and complete the designs in-house. You could also outsource tasks that require less experience and domain knowledge. This solution enables you to focus on your core business. Contrarily, you could outsource to specialized third-party organizations if you must outsource tasks requiring expert knowledge. Additionally, buying companies can solve issues such as poor quality, poor data management practices, and communication issues by conducting training during the early stages of the outsourcing contract. They can also recommend the use of CAD software for collaborative design. This ensures alignment with internal procedures and facilitates clarity. It also enables collaboration between the two factions.
Conclusion
Outsourcing enables companies to capitalize on external specialized expertise in CAD design. This leads to cost savings, reduced lead times, better access to certain technologies, surplus capacity support when there is a high influx of design projects, and improved competitiveness, just to mention a few benefits. When outsourcing CAD services, companies can choose from an array of options across various domains, including AEC, mechanical, and electrical and electronic design. What’s more, they can choose bespoke solutions, which are tailored to their unique needs. It is, however, essential to note that while outsourcing CAD services has numerous benefits, companies need to choose the right partner and implement best practices to ensure success. They also need to be strategic in their approach to solving challenges they would otherwise face. Simply put, strategic outsourcing helps companies to make the most of the operational transfer of responsibilities.
